What You Need To Know About Common Stocks

What You Need To Know About Common Stocks

When traders explore the world of investing, stocks are one of the things that would generally pop out. While there are several classifications of stocks, the most general ones are the common stocks. By definition, Common stocks are partial ownership of a corporation. They are also termed as shares for such reason.

Common stocks provide more than just an ownership in a corporation.  It gives its holders the right to vote on certain issues such as the acceptance of takeover bids or board elections. Votes usually come once per share meaning a holder can get a certain amount depending on the number of shares invested.

Common Stocks
Common stocks are called as such because of its general nature. They are more accessible than in other markets.

Holders can make money in two ways.

  1. Companies give out dividends to their shareholders. This comes with an annual report as well.
  2. Holders can sell their shares when prices move higher. Prices moves depending on a several economic factors. Traders can check these movements in their respective charts.

Holders of common stocks are also open to disadvantages however. Common Stocks uses a certain company’s risk capital which can be lost if a company fails. Holders can also receive less to zero income as well. This of course depends on the stock market’s conditions.

More so, Holders are not that prioritized in an event of bankruptcy. Companies ensures that creditors and preferred stockholders receive theirs first.

Additionally, common stocks have par value. Par value is defined as the value of certain share when sold after being firstly issued. This usually not guaranteed.

Common stocks have advantages as well. Holders can profit without a certain limit. Rules imposed by financial authorities serve as the only limit to such.

Stocks plays a major value in any investor’s portfolio. The risk involved is higher and this can rewards traders greatly. Regardless of being a volatile market, Stocks tend to outperform other securities which makes it a good market.

Read Also: Short Term Trading Benefits

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